SA may get much worse

The Herald (South Africa) - - OPINION & ANALYSIS - Is­mail La­gar­dien

SOUTH Africa is on the down­ward fall of an arc of sta­bil­ity and there is no clar­ity on how deep the fall will be.

It is al­most passé to keep re­peat­ing this, although never quite un­nec­es­sary.

Nev­er­the­less, on the up­ward the coun­try rose from the ve­nal­ity, cru­elty and in­jus­tice of the 1980s to fis­cal and fi­nan­cial con­sol­i­da­tion and sta­bil­ity, as part of a rel­a­tively strong econ­omy by the early 2000s.

At about the point when we were meant to reap the ben­e­fits of peak sta­bil­ity, in about 2009, the econ­omy be­gan its de­cline.

It is prob­a­bly at that point when a type of crim­inoc­racy be­gan to op­er­ate in a par­al­lel or shadow econ­omy that ef­fec­tively held back the coun­try’s for­mal econ­omy.

I de­rived the idea of a crim­inoc­racy (a use­ful but not by any means a de­fin­i­tive con­cept) from ex­pe­ri­ences and ob­ser­va­tions of or­gan­ised crime in south­ern Italy, mainly Cam­pa­nia and Si­cily.

It has been clear for a few years now that the con­cept is use­ful, at least for un­der­stand­ing how crim­i­nal­ity has hol­lowed out the state in South Africa.

A crim­inoc­racy emerges when groups of peo­ple – po­lit­i­cal for­ma­tions or or­gan­ised crime syn­di­cates – take over the po­lit­i­cal econ­omy of state and so­ci­ety, and cre­ate par­al­lel economies that op­er­ate in the shad­ows.

When this hap­pens, crim­i­nal net­works, en­ter­prises or groups of peo­ple con­trol ev­ery­thing, from small busi­nesses to large in­sti­tu­tions of state, like rev­enue col­lec­tion ser­vices or the po­lice and in­tel­li­gence com­mu­nity – and even cabi­net port­fo­lios. This takeover is made pos­si­ble when un­eth­i­cal con­duct is con­cealed be­hind cul­tural as­sim­i­la­tion of crim­i­nal ac­tiv­i­ties, and a rather flimsy ve­neer of le­gal­ity, or even his­tor­i­cal and po­lit­i­cal right­eous­ness.

When a crim­inoc­racy takes shape the po­lice and prose­cut­ing au­thor­i­ties can no longer be trusted as they are them­selves crim­i­nals or be­holden to po­lit­i­cal power.

The state, pro­vin­cial and lo­cal au­thor­i­ties sim­ply make way for crim­i­nals to cap­ture in­sti­tu­tions of gov­er­nance.

Lo­cal de­liv­ery of pub­lic goods and ser­vices be­comes non-ex­is­tent or the pub­lic have to pay bribes for mu­nic­i­pal ser­vices.

The pub­li­ca­tion, this week, of The Pres­i­dent’s Keep­ers, a book by in­ves­tiga­tive jour­nal­ist Jac­ques Pauw, brings the crim­inoc­racy is­sue back to the fore. Not that it had ever re­ceded.

Pauw writes about shady char­ac­ters who op­er­ate in the shad­ows to keep the pow­er­ful in place, se­cure priv­i­leges, and ac­cess and as­cen­sion of peo­ple con­nected to the rul­ing elite.

Pauw’s work, ex­tracts of which were pub­lished in the Sun­day papers, pro­vides us with an un­der­stand­ing of how a par­tic­u­lar type of par­al­lel or shadow econ­omy has been cre­ated in South Africa around the rul­ing elite.

The point to note, here, is the role of the state-party nexus in South Africa.

Shadow economies ex­ist ev­ery­where.

There is the for­mal econ­omy, that which com­prises the mil­lions of trans­ac­tions between peo­ple every day.

And then there is a type of shadow econ­omy com­pris­ing, at least in South Africa, the state-party nexus, where cash trans­fers are made, no taxes are paid, so­cial charges, like labour costs, are snubbed, and reg­u­la­tions are com­pletely avoided.

In de­vel­op­ing coun­tries shadow eco­nomic ac­tiv­i­ties gen­er­ally cor­re­spond to a large part of the for­mal econ­omy.

In some cases they rep­re­sent more than half of eco­nomic ac­tiv­i­ties, ac­cord­ing to one re­search project led by Cristina Terra, of the Essec Busi­ness School in France.

One in­di­ca­tor of the im­pact of shadow eco­nomic ac­tiv­i­ties is the de­cline in in­come from rev­enue.

This de­cline in rev­enue was a key point in Fi­nance Min­is­ter Malusi Gi­gaba’s mini-bud­get last week.

South Africa seems in­suf­fi­ciently pro­tected from shadow eco­nomic ac­tiv­i­ties.

In some ways, the state of South Africa’s econ­omy is back to where it was in the late 1980s.

It is worth re­call­ing what a for­mer fi­nance min­is­ter, Barend du Plessis, told his for­eign af­fairs coun­ter­part, Pik Botha, in 1985.

In Her­man Gil­iomee’s The Last Afrikaner Lead­ers: A Supreme Test of Power, Botha re­calls: “I will never for­get the night of July 31 when [Min­is­ter of Fi­nance] Barend du Plessis phoned me . . . [He said]: ‘Pik, I must tell you that the coun­try is fac­ing in­evitable bank­ruptcy . . . The process has started.’”

South Africa is not bank­rupt and the state has not col­lapsed. Not yet any­way. It is safe to say, none­the­less, that we are well on our way there: the process has started.

There was a pe­riod of nec­es­sary con­sol­i­da­tion un­der a demo­cratic gov­ern­ment that held moral author­ity and placed the sta­bil­ity of pub­lic fi­nance as a pri­or­ity.

What hap­pened between then, and to­day, may keep us oc­cu­pied for years to come.

The only cer­tainty that is emerg­ing from the fug of cham­bers in Pre­to­ria and the par­lia­men­tary com­plex in Cape Town is that things could get a lot worse be­fore they get any bet­ter.

Let me not be the one to tell the women in Cofimv­aba who work long hours every day to feed their fam­i­lies that things will get bet­ter.

They might ask “When?” – and for that there is no clear an­swer.

The down­ward slope of the arc of sta­bil­ity may be deeper than any­one could have an­tic­i­pated only 10 years ago.

Dr Is­mail La­gar­dien is the for­mer ex­ec­u­tive dean of busi­ness and eco­nom­ics sci­ences at Nel­son Man­dela Uni­ver­sity.

APARTHEID LEAD­ERS: Na­tional Party cabi­net min­is­ters Barend du Plessis, left, and Pik Botha

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